When doing business in china, what's trust got to do with it


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When doing business in china, what's trust got to do with it

  1. 1. WHEN DOING BUSINESS INCHINA, WHATS TRUST GOTTO DO WITH ITFor additional information about Business with Chinaplease visit www.China-Business-Connect.com
  2. 2. www.China-Business-Connect.comIf you are considering doing business in China you are probably awarethat there are fundamental differences to consider, as compared to thewestern world. Being aware of these differences and working within thesystem will allow you to make the most of your opportunity, versus justtrying to do it the same way and going against the culture.As soon as you start to do business in China you will become aware of“Guanxi” (relationships), if you are not already familiar with thisconcept. But what you may not know is that there is a right way and awrong way to work within this framework, and the faster that you canadapt the better chances of success that you will have.2
  3. 3. www.China-Business-Connect.comGuanxi and XinrenWhere Guanxi is the basis of relationships, which are based on eitheryour cultivated relationships or bought relationships, Xinren is the basisfor trust. This is a core business principle that is the same across theworld, trust is what makes business relationships, but the difference liesin how the Chinese business culture builds this trust. All of the trust inbusiness relationships in China are built on personal relationships.Therefore, building up your Xinren, or business trust, relies on yourability to connect outside of the boardroom and get to know the manbehind the business.3
  4. 4. www.China-Business-Connect.comThe main logic behind this thinking is that the Chinese business peopledon’t trust the legal system. Because of this, they are less likely to takea chance with the trust that they extend and need to make sure thatyou develop a proper personal relationship first. The legal system issimply too inadequate for the pace of business innovation anddevelopment, and therefore most Chinese business people avoid all ofthese legal hassles and only deal with companies after they develop theXinren.There are 5 main reasons that, in China, it may take a bit longer todevelop the trust, which has to be earned and is not given freely.4
  5. 5. www.China-Business-Connect.comBroken Legal System – the amount of time that its legal system has hadto try and adjust to the sudden explosion in business, makes it difficultto get new laws passed fast enough.Chinese Culture – the abrupt changes in government and retention ofthe wartime attitude shapes the outcome of most negotiations beforethey begin. They can frame these interactions as combat, and instead ofworking together to find the best benefit for each party they defendtheir position.Bureaucracy and Corruption – the structure of government, with theofficials being loyal to their superiors above anything else, leads tocorruption when one of the superiors sees an opportunity.5
  6. 6. www.China-Business-Connect.comMaterialism - with the Chinese just beginning to covet money in thesame way as the western world has been for the past century, thevalues of honesty and business integrity may not be as firmly rootedThere are however a few things that you can do to increase yourchances of connecting with your Chinese counterparts, which will leadto an easier time doing business.Contracts - make sure that you use a contract. You may get caught up inthe personal-business blurring of lines and think that just because thelegal system isn’t optimal that you don’t need one, but you do, and youneed more than just a contract.6
  7. 7. www.China-Business-Connect.comConnect with Right People – All companies are made up of a group ofpeople so spend time connecting on a personal level, especially outsideof the business setting, to develop trust and lasting relationships.Use a Process – make sure that you have a process that outlines theexpectations so that you can avoid misinterpretation for the basis ofunfair business practices. Get all of the rules on the table so thatanyone in your organization or your Chinese partner’s is clearly adhereto these rules; or not.7
  8. 8. For additional information about Business with Chinaplease visit www.China-Business-Connect.com